NN, Inc. (NASDAQ: NNBR), a global diversified industrial company
that manufactures high-precision components and assemblies, today
reported its financial results for the third quarter ended
September 30, 2023.
Financial and Strategic Highlights
- Net sales of $124.4 million, down 2.2% versus prior year
period;
- Operating loss of $2.7 million and adjusted EBITDA of $14.5
million;
- Free cash flow of $11.3 million, up significantly versus prior
period with positive free cash flow generation of $17 million over
the trailing year;
- Reduced leverage ratio to 3.37x, down sequentially from 3.87x,
supported by improved adjusted EBITDA and cash flow
performance;
- Key program wins including attractive awards in EV electric
power steering markets;
- Tightened full-year forecast ranges for net sales and adjusted
EBITDA while raising free cash flow forecast;
- Successfully supplemented the executive management team with
new Chief Operating Officer and Chief Procurement Officer;
- Reentered medical market through creation of NN Medical, the
Company’s new medical device division; and
- Launched multiple long-term strategic initiatives to drive
enhanced cash flows and shareholder value, focused on growth and
cost productivity improvement.
Harold Bevis, President and Chief Executive Officer, commented,
“In our first quarter with the newly supplemented management team,
we delivered improved operating results and made significant
progress against many of our strategic transformation initiatives.
We’ve been intently focused on fixing and/or exiting unprofitable
business, diligently managing our working capital, and implementing
rigorous cost productivity and margin expansion programs across the
organization. The early stages of our strategy to increase
organizational commitment around our transformation strategy can be
clearly seen in our strong free cash flow performance this period.
I’m encouraged by the early results of these initiatives and
believe there is much more to accomplish.”
Bevis continued, “We’ve also made considerable progress against
many of our commercial goals by leveraging existing customers and
markets where we have strong reputations which is helping us win
new business. Although we’re encouraged by our new business wins
year-to-date and current partnerships, we’re particularly excited
about our new market opportunities. Subsequent to quarter-end, we
created a division focused on the medical device market, and we are
very confident in our ability to leverage our existing footprint
and technical market knowhow to immediately win new, profitable
business. Along with medical, there are multiple organic entry
opportunities such as electric shielding that further strengthen
our confidence in our ability to achieve our commercial goals. We
look forward to utilizing our unique capabilities and in-depth
understanding of market value creation in precision machining and
stampings and further applying them to newer markets and
customers.”
Michael Felcher, Senior Vice President and Chief Financial
Officer, added, “We’re pleased with the margin expansion and growth
showcased in the third quarter which supported expansion of both
our adjusted EBITDA and operating income. Our cost reduction
efforts and aggressive strategic actions to eradicate unprofitable
parts of the business have already positively impacted our results,
and we continue to expect roughly $10 million in adjusted EBITDA
improvement once we’ve completed this work. We’re also encouraged
by the free cash flow generation of our business which helped to
reduce our leverage profile to 3.37x. While our demand outlook for
the year remains the same, the recent traction we’ve gained on our
initiatives aimed at cash flow generation, improving adjusted
EBITDA results, and lowering our leverage are supportive to our
improving forward expectations.”
Third Quarter GAAP Results
Net sales were $124.4 million, a decrease of 2.2% from the third
quarter of 2022, primarily due to reduced volume, partially offset
by higher customer pricing and favorable foreign exchange
effects.
Loss from operations was $2.7 million compared to a loss from
operations of $2.1 million in the third quarter of 2022. The
increase in loss from operations was primarily driven by lower
volumes and increased wages and stock compensation expense,
partially offset by cost savings initiatives.
Income from operations for Power Solutions was $3.9 million
compared to income from operations of $2.6 million for the same
period in 2022. Loss from operations for Mobile Solutions was $1.3
million compared to loss from operations of $0.5 million for the
same period in 2022.
Net loss was $5.1 million compared to net loss of $2.2 million
for the same period in 2022. The increase in net loss is primarily
due to reduced sales volume and unfavorable warrant
revaluations.
Third Quarter Adjusted Results
Adjusted income from operations for the third quarter of 2023
was $3.7 million compared to adjusted income from operations of
$2.5 million for the same period in 2022. Adjusted EBITDA was $14.5
million, or 11.6% of sales, compared to $11.8 million, or 9.3% of
sales, for the same period in 2022. Adjusted net income was $0.1
million, or $0.01 per diluted share, compared to adjusted net
income of $1.5 million, or $0.03 per diluted share, for the same
period in 2022.
Free cash flow was a generation of cash of $11.3 million
compared to a use of cash of $4.4 million for the same period in
2022.
Power Solutions
Net sales for the third quarter of 2023 were $45.5 million
compared to $51.1 million in the third quarter of 2022, a decrease
of 11.0% or $5.6 million. The decrease in sales was primarily due
to lower volume, partially offset by higher pricing and favorable
foreign exchange effects. Adjusted income from operations was $7.1
million compared to adjusted income from operations of $5.8 million
in the third quarter of 2022. The increase in adjusted income from
operations was primarily due to facility closure savings, partially
offset by lower volumes.
Mobile Solutions
Net sales for the third quarter of 2023 were $79.0 million
compared to $76.1 million in the third quarter of 2022, an increase
of 3.7% or $2.8 million. The increase in sales was primarily due to
higher customer pricing, partially offset by lower volume and
unfavorable foreign exchange effects. Adjusted income from
operations was $1.6 million compared to adjusted income from
operations of $0.7 million in the third quarter of 2022. The
increase in adjusted income from operations was primarily driven by
a $1.1 million benefit from a customer settlement as well as
reductions to indirect labor.
2023 Outlook
Based on financial results for thus far year to date, as well as
expectations for the remainder of the year, the Company has
narrowed its ranged outlook for revenues and Adjusted EBITDA and
raised the range of free cash flow expectations for the full year.
Full-year 2023 financial outlook is as follows:
- Revenue in the range of $487 million to $497 million;
- Adjusted EBITDA in the range of $40 million to $44 million;
and
- Free cash flow in the range of $10
million to $14 million.
Michael Felcher, Senior Vice President and Chief
Financial Officer, commented, “We are tightening our sales and
profitability guidance for the full-year 2023 to align with our
year-to-date results and our expectations for consistent demand
levels year-over-year. Despite broader macro headwinds, we are
making great progress in improving our margins and cash generating
capabilities and thus are raising our fiscal year outlook for free
cash flow. Our transformation strategy is working, and our enhanced
management team is well positioned to accelerate our plan and
execute well within our targets for sales, adjusted EBITDA, and
free cash flow.”
Conference Call
NN will discuss its results during its quarterly investor
conference call on November 7, 2023, at 9:00 a.m. ET. The call
and supplemental presentation may be accessed via NN's website,
www.nninc.com. The conference call can also be accessed by dialing
1-877-255-4315 or 1-412-317-6579. For those who are unavailable to
listen to the live broadcast, a replay will be available shortly
after the call until November 7, 2024.
NN discloses in this press release the non-GAAP financial
measures of adjusted income (loss) from operations, adjusted
EBITDA, adjusted net income (loss), adjusted net income (loss) per
diluted common share, and free cash flow. Each of these non-GAAP
financial measures provides supplementary information about the
impacts of restructuring and integration expense, acquisition and
transition expenses, foreign exchange impacts on inter-company
loans, amortization of intangibles and deferred financing costs,
and other non-operating impacts on our business.
The financial tables found later in this press release include a
reconciliation of adjusted income (loss) from operations, adjusted
operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted
net income (loss), adjusted net income (loss) per diluted share,
free cash flow to the U.S. GAAP financial measures of income (loss)
from operations, net income (loss), net income (loss) per diluted
common share, and cash provided (used) by operating activities.
About NN, Inc.
NN, Inc., a global diversified industrial company, combines
advanced engineering and production capabilities with in-depth
materials science expertise to design and manufacture
high-precision components and assemblies for a variety of markets
on a global basis. Headquartered in Charlotte, North Carolina, NN
has facilities in North America, Europe, South America, and Asia.
For more information about the company and its products, please
visit www.nninc.com.
Except for specific historical information, many of the matters
discussed in this press release may express or imply projections of
revenues or expenditures, statements of plans and objectives or
future operations or statements of future economic performance.
These statements may discuss goals, intentions and expectations as
to future trends, plans, events, results of operations or financial
condition, or state other information relating to NN, Inc. based on
current beliefs of management as well as assumptions made by, and
information currently available to, management. Forward-looking
statements generally will be accompanied by words such as
“anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,”
“guidance,” “intend,” “may,”, “will” “possible,” “potential,”
“predict,” “project” or other similar words, phrases or
expressions. Forward-looking statements involve a number of risks
and uncertainties that are outside of management’s control and that
may cause actual results to be materially different from such
forward-looking statements. Such factors include, among others,
general economic conditions and economic conditions in the
industrial sector; the impacts of pandemics, epidemics, disease
outbreaks and other public health crises, including the COVID-19
pandemic, on our financial condition, business operations and
liquidity; competitive influences; risks that current customers
will commence or increase captive production; risks of capacity
underutilization; quality issues; material changes in the costs and
availability of raw materials; economic, social, political and
geopolitical instability, currency fluctuation, and other risks of
doing business outside of the United States; inflationary pressures
and changes in the cost or availability of materials, supply chain
shortages and disruptions, and the availability of labor; our
dependence on certain major customers, some of whom are not parties
to long-term agreements (and/or are terminable on short notice);
the impact of acquisitions and divestitures; our ability to hire or
retain key personnel; the level of our indebtedness; the
restrictions contained in our debt agreements; our ability to
obtain financing at favorable rates, if at all, and to refinance
existing debt as it matures; unanticipated difficulties integrating
acquisitions; new laws and governmental regulations; the impact of
climate change on our operations; and cyber liability or potential
liability for breaches of our or our service providers’ information
technology systems or business operations disruptions. The
foregoing factors should not be construed as exhaustive and should
be read in conjunction with the sections entitled “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” included in the Company’s filings made
with the Securities and Exchange Commission. Any forward-looking
statement speaks only as of the date of this press release, and the
Company undertakes no obligation to publicly update or review any
forward-looking statement, whether as a result of new information,
future developments or otherwise, except as required by law. New
risks and uncertainties may emerge from time to time, and it is not
possible for the Company to predict their occurrence or how they
will affect the Company. The Company qualifies all forward-looking
statements by these cautionary statements.
Investor & Media Contacts: Joe Caminiti or
Alec Steinberg, InvestorsTim Peters,
MediaNNBR@alpha-ir.com312-445-2870
Financial Tables Follow
|
NN, Inc.Condensed Consolidated Statements
of Operations and Comprehensive Income (Loss)
(Unaudited) |
|
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
(in thousands, except per share data) |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net sales |
$ |
124,443 |
|
|
$ |
127,297 |
|
|
$ |
376,737 |
|
|
$ |
380,726 |
|
Cost of sales (exclusive of
depreciation and amortization shown separately below) |
|
104,543 |
|
|
|
108,033 |
|
|
|
320,648 |
|
|
|
316,500 |
|
Selling, general, and
administrative expense |
|
11,693 |
|
|
|
10,205 |
|
|
|
35,833 |
|
|
|
38,453 |
|
Depreciation and
amortization |
|
11,577 |
|
|
|
11,193 |
|
|
|
34,643 |
|
|
|
33,962 |
|
Other operating expense
(income), net |
|
(631 |
) |
|
|
(17 |
) |
|
|
(526 |
) |
|
|
1,862 |
|
Loss from
operations |
|
(2,739 |
) |
|
|
(2,117 |
) |
|
|
(13,861 |
) |
|
|
(10,051 |
) |
Interest expense |
|
5,739 |
|
|
|
3,746 |
|
|
|
15,484 |
|
|
|
10,673 |
|
Other expense (income),
net |
|
(1,463 |
) |
|
|
(1,156 |
) |
|
|
1,970 |
|
|
|
(4,219 |
) |
Loss before benefit
(provision) for income taxes and share of net income from joint
venture |
|
(7,015 |
) |
|
|
(4,707 |
) |
|
|
(31,315 |
) |
|
|
(16,505 |
) |
Benefit (provision) for income
taxes |
|
245 |
|
|
|
1,068 |
|
|
|
(1,381 |
) |
|
|
(1,514 |
) |
Share of net income from joint
venture |
|
1,713 |
|
|
|
1,424 |
|
|
|
3,087 |
|
|
|
3,935 |
|
Net loss |
$ |
(5,057 |
) |
|
$ |
(2,215 |
) |
|
$ |
(29,609 |
) |
|
$ |
(14,084 |
) |
Other
comprehensive loss: |
|
|
|
|
|
|
|
Foreign currency transaction loss |
|
(3,072 |
) |
|
|
(7,653 |
) |
|
|
(3,606 |
) |
|
|
(13,543 |
) |
Interest rate swap: |
|
|
|
|
|
|
|
Change in fair value, net of tax |
|
— |
|
|
|
904 |
|
|
|
(230 |
) |
|
|
2,464 |
|
Reclassification adjustments included in net loss, net of tax |
|
(449 |
) |
|
|
(116 |
) |
|
|
(1,366 |
) |
|
|
(51 |
) |
Other
comprehensive loss |
$ |
(3,521 |
) |
|
$ |
(6,865 |
) |
|
$ |
(5,202 |
) |
|
$ |
(11,130 |
) |
Comprehensive loss |
$ |
(8,578 |
) |
|
$ |
(9,080 |
) |
|
$ |
(34,811 |
) |
|
$ |
(25,214 |
) |
|
|
|
|
|
|
|
|
Basic and diluted net loss per
share |
$ |
(0.18 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.84 |
) |
|
$ |
(0.49 |
) |
Shares
used to calculate basic and diluted net loss per share |
|
47,539 |
|
|
|
44,711 |
|
|
|
46,410 |
|
|
|
44,670 |
|
|
NN, Inc.Condensed Consolidated Balance
Sheets(Unaudited) |
|
(in thousands, except
per share data) |
September 30,2023 |
|
December 31,2022 |
Assets |
|
|
|
Current
assets: |
|
|
|
Cash and cash equivalents |
$ |
21,790 |
|
|
$ |
12,808 |
|
Accounts receivable, net |
|
73,229 |
|
|
|
74,129 |
|
Inventories |
|
70,917 |
|
|
|
80,682 |
|
Income tax receivable |
|
12,182 |
|
|
|
12,164 |
|
Prepaid assets |
|
3,800 |
|
|
|
2,794 |
|
Other current assets |
|
11,339 |
|
|
|
9,123 |
|
Total
current assets |
|
193,257 |
|
|
|
191,700 |
|
Property, plant and equipment, net |
|
185,707 |
|
|
|
197,637 |
|
Operating lease right-of-use assets |
|
43,549 |
|
|
|
46,713 |
|
Intangible assets, net |
|
62,202 |
|
|
|
72,891 |
|
Investment in joint venture |
|
29,131 |
|
|
|
31,802 |
|
Deferred tax assets |
|
164 |
|
|
|
102 |
|
Other non-current assets |
|
6,688 |
|
|
|
5,282 |
|
Total
assets |
$ |
520,698 |
|
|
$ |
546,127 |
|
Liabilities, Preferred Stock, and Stockholders’
Equity |
|
|
|
Current
liabilities: |
|
|
|
Accounts payable |
$ |
49,347 |
|
|
$ |
45,871 |
|
Accrued salaries, wages and benefits |
|
13,243 |
|
|
|
11,671 |
|
Income tax payable |
|
340 |
|
|
|
926 |
|
Short-term debt and current maturities of long-term debt |
|
6,699 |
|
|
|
3,321 |
|
Current portion of operating lease liabilities |
|
5,407 |
|
|
|
5,294 |
|
Other current liabilities |
|
13,483 |
|
|
|
11,723 |
|
Total
current liabilities |
|
88,519 |
|
|
|
78,806 |
|
Deferred
tax liabilities |
|
4,137 |
|
|
|
5,596 |
|
Long-term debt, net of current portion |
|
145,892 |
|
|
|
149,389 |
|
Operating lease liabilities,
net of current portion |
|
47,841 |
|
|
|
51,411 |
|
Other non-current
liabilities |
|
16,288 |
|
|
|
9,960 |
|
Total
liabilities |
|
302,677 |
|
|
|
295,162 |
|
Commitments and contingencies |
|
|
|
Series D perpetual preferred
stock |
|
74,295 |
|
|
|
64,701 |
|
Stockholders' equity: |
|
|
|
Common stock |
|
473 |
|
|
|
439 |
|
Additional paid-in capital |
|
460,382 |
|
|
|
468,143 |
|
Accumulated deficit |
|
(274,807 |
) |
|
|
(245,198 |
) |
Accumulated other comprehensive loss |
|
(42,322 |
) |
|
|
(37,120 |
) |
Total
stockholders’ equity |
|
143,726 |
|
|
|
186,264 |
|
Total
liabilities, preferred stock, and stockholders’ equity |
$ |
520,698 |
|
|
$ |
546,127 |
|
|
NN, Inc.Condensed Consolidated Statements
of Cash Flows (Unaudited) |
|
|
Nine Months Ended September
30, |
(in thousands) |
|
2023 |
|
|
|
2022 |
|
Cash flows from operating activities |
|
|
|
Net
loss |
$ |
(29,609 |
) |
|
$ |
(14,084 |
) |
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
|
|
|
Depreciation and amortization |
|
34,643 |
|
|
|
33,962 |
|
Amortization of debt issuance costs and discount |
|
1,409 |
|
|
|
1,021 |
|
Paid-in-kind interest |
|
1,491 |
|
|
|
— |
|
Total derivative loss (gain), net of cash settlements |
|
3,139 |
|
|
|
(4,858 |
) |
Share of net income from joint venture, net of cash dividends
received |
|
851 |
|
|
|
2,310 |
|
Share-based compensation expense |
|
2,058 |
|
|
|
3,862 |
|
Deferred income taxes |
|
(1,531 |
) |
|
|
(1,831 |
) |
Other |
|
(776 |
) |
|
|
(3,096 |
) |
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable |
|
335 |
|
|
|
(15,667 |
) |
Inventories |
|
9,692 |
|
|
|
(11,314 |
) |
Accounts payable |
|
5,240 |
|
|
|
9,827 |
|
Income taxes receivable and payable, net |
|
(576 |
) |
|
|
(403 |
) |
Other |
|
(2,476 |
) |
|
|
(2,400 |
) |
Net cash
provided by (used in) operating activities |
|
23,890 |
|
|
|
(2,671 |
) |
Cash flows from investing activities |
|
|
|
Acquisition of property, plant and equipment |
|
(16,292 |
) |
|
|
(14,011 |
) |
Proceeds
from sale of property, plant, and equipment |
|
2,876 |
|
|
|
460 |
|
Net cash
used in investing activities |
|
(13,416 |
) |
|
|
(13,551 |
) |
Cash flows from financing activities |
|
|
|
Proceeds
from long-term debt |
|
52,000 |
|
|
|
32,000 |
|
Repayments of long-term debt |
|
(55,522 |
) |
|
|
(28,158 |
) |
Cash
paid for debt issuance costs |
|
(55 |
) |
|
|
(136 |
) |
Proceeds
from short-term debt |
|
3,648 |
|
|
|
— |
|
Other |
|
(1,276 |
) |
|
|
(2,265 |
) |
Net cash
provided by (used in) financing activities |
|
(1,205 |
) |
|
|
1,441 |
|
Effect
of exchange rate changes on cash flows |
|
(287 |
) |
|
|
(1,324 |
) |
Net
change in cash and cash equivalents |
|
8,982 |
|
|
|
(16,105 |
) |
Cash and
cash equivalents at beginning of period |
|
12,808 |
|
|
|
28,656 |
|
Cash and
cash equivalents at end of period |
$ |
21,790 |
|
|
$ |
12,551 |
|
|
Reconciliation of GAAP Income (Loss) from Operations to
Non-GAAP Adjusted Income (Loss) from Operations |
|
(in
thousands) |
Three Months EndedSeptember 30, |
NN, Inc. Consolidated |
|
2023 |
|
|
|
2022 |
|
GAAP loss from operations |
$ |
(2,739 |
) |
|
$ |
(2,117 |
) |
Professional fees |
|
32 |
|
|
|
341 |
|
Personnel costs (1) |
|
903 |
|
|
|
17 |
|
Facility costs (2) |
|
1,893 |
|
|
|
644 |
|
Amortization of
intangibles |
|
3,563 |
|
|
|
3,587 |
|
Non-GAAP adjusted income from
operations (a) |
$ |
3,652 |
|
|
$ |
2,472 |
|
|
|
|
|
Non-GAAP adjusted operating
margin (3) |
|
2.9 |
% |
|
|
1.9 |
% |
GAAP net sales |
$ |
124,443 |
|
|
$ |
127,297 |
|
|
|
|
|
|
|
|
|
(in
thousands) |
Three Months EndedSeptember 30, |
Power Solutions |
|
2023 |
|
|
|
2022 |
|
GAAP income from
operations |
$ |
3,936 |
|
|
$ |
2,582 |
|
Professional fees |
|
— |
|
|
|
174 |
|
Personnel costs (1) |
|
122 |
|
|
|
— |
|
Facility costs (2) |
|
324 |
|
|
|
300 |
|
Amortization of
intangibles |
|
2,725 |
|
|
|
2,749 |
|
Non-GAAP adjusted income from
operations (a) |
$ |
7,107 |
|
|
$ |
5,805 |
|
|
|
|
|
Non-GAAP adjusted operating
margin (3) |
|
15.6 |
% |
|
|
11.4 |
% |
GAAP net sales |
$ |
45,484 |
|
|
$ |
51,124 |
|
(in
thousands) |
Three Months EndedSeptember 30, |
Mobile Solutions |
|
2023 |
|
|
|
2022 |
|
GAAP loss from operations |
$ |
(1,283 |
) |
|
$ |
(474 |
) |
Personnel costs (1) |
|
462 |
|
|
|
— |
|
Facility costs (2) |
|
1,569 |
|
|
|
344 |
|
Amortization of
intangibles |
|
838 |
|
|
|
838 |
|
Non-GAAP adjusted income from
operations (a) |
|
1,586 |
|
|
|
708 |
|
|
|
|
|
Share of net income from joint
venture |
|
1,713 |
|
|
|
1,424 |
|
Non-GAAP adjusted income from
operations with JV (a) |
$ |
3,299 |
|
|
$ |
2,132 |
|
|
|
|
|
Non-GAAP adjusted operating
margin (3) |
|
4.2 |
% |
|
|
2.8 |
% |
GAAP net sales |
$ |
78,961 |
|
|
$ |
76,122 |
|
|
|
|
|
|
|
|
|
(in
thousands) |
Three Months EndedSeptember 30, |
Elimination |
|
2023 |
|
|
|
2022 |
|
GAAP net sales |
$ |
(2 |
) |
|
$ |
51 |
|
(1) Personnel costs include recruitment,
retention, relocation, and severance
costs(2) Facility costs include costs of opening /
closing facilities and relocation / exit of manufacturing
operations(3) Non-GAAP adjusted operating margin =
Non-GAAP adjusted income (loss) from operations / GAAP net
sales
|
Reconciliation of GAAP Net Income (Loss) to Non-GAAP
Adjusted EBITDA |
|
|
Three Months EndedSeptember 30, |
(in thousands) |
|
2023 |
|
|
|
2022 |
|
GAAP net loss |
$ |
(5,057 |
) |
|
$ |
(2,215 |
) |
|
|
|
|
Benefit for income taxes |
|
(245 |
) |
|
|
(1,068 |
) |
Interest expense |
|
5,739 |
|
|
|
3,746 |
|
Change in fair value of
preferred stock derivatives and warrants |
|
(2,104 |
) |
|
|
(1,623 |
) |
Depreciation and
amortization |
|
11,577 |
|
|
|
11,193 |
|
Professional fees |
|
32 |
|
|
|
341 |
|
Personnel costs (1) |
|
903 |
|
|
|
17 |
|
Facility costs (2) |
|
1,893 |
|
|
|
644 |
|
Non-cash stock
compensation |
|
1,208 |
|
|
|
307 |
|
Non-cash foreign exchange
(gain) on inter-company loans |
|
520 |
|
|
|
444 |
|
Non-GAAP adjusted EBITDA
(b) |
$ |
14,466 |
|
|
$ |
11,786 |
|
|
|
|
|
Non-GAAP adjusted EBITDA
margin (4) |
|
11.6 |
% |
|
|
9.3 |
% |
GAAP net sales |
$ |
124,443 |
|
|
$ |
127,297 |
|
|
|
|
|
(1) Personnel
costs include recruitment, retention, relocation, and severance
costs |
(2) Facility costs
include costs of opening / closing facilities and relocation / exit
of manufacturing operations |
(3) Non-GAAP
adjusted operating margin = Non-GAAP adjusted income (loss) from
operations / GAAP net sales |
(4) Non-GAAP
adjusted EBITDA margin = Non-GAAP adjusted EBITDA / GAAP net
sales |
|
Reconciliation of GAAP Net Income (Loss) to Non-GAAP
Adjusted Net Income and GAAP Net Income (Loss) per Diluted Common
Share to Non-GAAP Adjusted Net Income (Loss) per Diluted Common
Share |
|
|
Three Months EndedSeptember 30, |
(in thousands) |
|
2023 |
|
|
|
2022 |
|
GAAP net loss |
$ |
(5,057 |
) |
|
$ |
(2,215 |
) |
|
|
|
|
Pre-tax professional fees |
|
32 |
|
|
|
341 |
|
Pre-tax personnel costs |
|
903 |
|
|
|
17 |
|
Pre-tax facility costs |
|
1,893 |
|
|
|
644 |
|
Non-cash foreign exchange
(gain) on inter-company loans |
|
520 |
|
|
|
444 |
|
Pre-tax change in fair value
of preferred stock derivatives and warrants |
|
(2,104 |
) |
|
|
(1,623 |
) |
Pre-tax amortization of
intangibles and deferred financing costs |
|
4,092 |
|
|
|
3,946 |
|
Tax effect of adjustments
reflected above (c) |
|
(162 |
) |
|
|
(800 |
) |
Non-GAAP discrete tax
adjustments |
|
— |
|
|
|
749 |
|
Non-GAAP adjusted net income
(loss) (d) |
$ |
117 |
|
|
$ |
1,503 |
|
|
|
|
|
|
Three Months EndedSeptember 30, |
(per diluted common
share) |
|
2023 |
|
|
|
2022 |
|
GAAP net loss per diluted
common share |
$ |
(0.18 |
) |
|
$ |
(0.11 |
) |
|
|
|
|
Pre-tax professional fees |
|
— |
|
|
|
0.01 |
|
Pre-tax personnel costs |
|
0.02 |
|
|
|
— |
|
Pre-tax facility costs |
|
0.04 |
|
|
|
0.01 |
|
Pre-tax foreign exchange
(gain) loss on inter-company loans |
|
0.01 |
|
|
|
0.01 |
|
Pre-tax change in fair value
of preferred stock derivatives and warrants |
|
(0.04 |
) |
|
|
(0.04 |
) |
Pre-tax amortization of
intangibles and deferred financing costs |
|
0.09 |
|
|
|
0.09 |
|
Tax effect of adjustments
reflected above (c) |
|
— |
|
|
|
(0.02 |
) |
Non-GAAP discrete tax
adjustments |
|
— |
|
|
|
0.02 |
|
Preferred stock cumulative
dividends and deemed dividends |
|
0.07 |
|
|
|
0.06 |
|
Non-GAAP adjusted net income
(loss) per diluted common share (d) |
$ |
0.01 |
|
|
$ |
0.03 |
|
Shares used to calculate net
earnings (loss) per share |
|
47,539 |
|
|
|
44,711 |
|
|
Reconciliation of Operating Cash Flow to Free Cash
Flow |
|
|
Three Months Ended September
30, |
(in thousands) |
|
2023 |
|
|
|
2022 |
|
Net cash provided by (used in) operating activities |
$ |
15,247 |
|
|
$ |
(127 |
) |
Acquisition of property, plant, and equipment |
|
(4,096 |
) |
|
|
(4,308 |
) |
Proceeds from sale of property, plant, and equipment |
|
99 |
|
|
|
39 |
|
Free cash flow |
$ |
11,250 |
|
|
$ |
(4,396 |
) |
The Company discloses in this presentation the non-GAAP
financial measures of adjusted income (loss) from operations,
adjusted EBITDA, adjusted net income (loss), adjusted net income
(loss) per diluted common share, and free cash flow. Each of these
non-GAAP financial measures provides supplementary information
about the impacts of acquisition, divestiture and integration
related expenses, foreign-exchange impacts on inter-company loans,
reorganizational and impairment charges. Over the past five years,
we have completed several acquisitions, one of which was
transformative for the Company, and sold two of our businesses. The
costs we incurred in completing such acquisitions, including the
amortization of intangibles and deferred financing costs, and these
divestitures have been excluded from these measures because their
size and inconsistent frequency are unrelated to our commercial
performance during the period, and which we believe are not
indicative of our ongoing operating costs. We exclude the impact of
currency translation from these measures because foreign exchange
rates are not under management’s control and are subject to
volatility. Other non-operating charges are excluded as the charges
are not indicative of our ongoing operating cost. We believe the
presentation of adjusted income (loss) from operations, adjusted
EBITDA, adjusted net income (loss), adjusted net income (loss) per
diluted common share, and free cash flow provides useful
information in assessing our underlying business trends and
facilitates comparison of our long-term performance over given
periods.
The non-GAAP financial measures provided herein may not provide
information that is directly comparable to that provided by other
companies in the Company's industry, as other companies may
calculate such financial results differently. The Company's
non-GAAP financial measures are not measurements of financial
performance under GAAP and should not be considered as alternatives
to actual income growth derived from income amounts presented in
accordance with GAAP. The Company does not consider these non-GAAP
financial measures to be a substitute for, or superior to, the
information provided by GAAP financial results.
(a) Non-GAAP Adjusted income (loss) from operations represents
GAAP income (loss) from operations, adjusted to exclude the effects
of restructuring and integration expense; non-operational charges
related to acquisition and transition expense, intangible
amortization costs for fair value step-up in values related to
acquisitions, non-cash impairment charges, and when applicable, our
share of income from joint venture operations. We believe this
presentation is commonly used by investors and professional
research analysts in the valuation, comparison, rating, and
investment recommendations of companies in the industrial industry.
We use this information for comparative purposes within the
industry. Non-GAAP adjusted income (loss) from operations is not a
measure of financial performance under GAAP and should not be
considered as a measure of liquidity or as an alternative to GAAP
income (loss) from operations.
(b) Non-GAAP adjusted EBITDA represents GAAP net income (loss),
adjusted to include income taxes, interest expense, write-off of
unamortized debt issuance costs, interest rate swap payments and
change in fair value that was recognized in earnings, change in
fair value of preferred stock derivatives and warrants,
depreciation and amortization, charges related to acquisition and
transition costs, non-cash stock compensation expense, foreign
exchange gain (loss) on inter-company loans, restructuring and
integration expense, costs related to divested businesses and
litigation settlements, income from discontinued operations, and
non-cash impairment charges, to the extent applicable. We believe
this presentation is commonly used by investors and professional
research analysts in the valuation, comparison, rating, and
investment recommendations of companies in the industrial industry.
We use this information for comparative purposes within the
industry. Non-GAAP adjusted EBITDA is not a measure of financial
performance under GAAP and should not be considered as a measure of
liquidity or as an alternative to GAAP income (loss) from
continuing operations.
(c) This line item reflects the aggregate tax effect of all
non-tax adjustments reflected in the respective table. NN, Inc.
estimates the tax effect of the adjustment items identified in the
reconciliation schedule above by applying the applicable statutory
rates by tax jurisdiction unless the nature of the item and/or the
tax jurisdiction in which the item has been recorded requires
application of a specific tax rate or tax treatment.
(d) Non-GAAP adjusted net income (loss) represents GAAP net
income (loss) adjusted to exclude the tax-affected effects of
charges related to acquisition and transition costs, foreign
exchange gain (loss) on inter-company loans, restructuring and
integration charges, amortization of intangibles costs for fair
value step-up in values related to acquisitions and amortization of
deferred financing costs, non-cash impairment charges, write-off of
unamortized debt issuance costs, interest rate swap payments and
change in fair value, change in fair value of preferred stock
derivatives and warrants, costs related to divested businesses and
litigation settlements, income (loss) from discontinued operations,
and preferred stock cumulative dividends and deemed dividends. We
believe this presentation is commonly used by investors and
professional research analysts in the valuation, comparison,
rating, and investment recommendations of companies in the
industrial industry. We use this information for comparative
purposes within the industry.
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